The First-Tier Tribunal has come to the aid of a negligent, but fundamentally honest, publican who failed to deduct PAYE from sums paid to part-time bar staff in the belief that their earnings fell well below the taxable income threshold. In overturning £8,000 in penalties and greatly reducing the publican’s assessed liability, the tribunal noted that it would be ‘an absolute travesty’ to force him into bankruptcy.
In what the tribunal described as ‘a sad case’, the publican had been ignorant of his obligation to complete tax forms P46 and P38S when employing part time staff, mainly students, who had no P45s to illustrate their past earnings. Following an inquiry by Her Majesty’s Revenue and Customs (HMRC), the publican was hit with penalties totalling £8,000 and a tax assessment of more than £35,000, although this was subsequently reduced to approximately £30,000 after a review.
Reducing the tax assessment to approximately £3,000 and overturning the penalties, the tribunal found that the publican was an honest witness and accepted his account in its entirety. It found that the ‘plain reality’ was that most, if not all, of the part-time workers would have fallen below the taxable income threshold.
Although the tribunal acknowledged that the publican had been negligent, it found that he did have a reasonable excuse for late filing of end of year returns in that he had been acting on his accountant’s advice. Paying tribute to the tax authorities’ conduct of the case, the tribunal concluded: “It was extremely encouraging to see HMRC being realistic and not wishing to inflict pain and bankruptcy on an honest taxpayer”.